Budget Documents, Staff Reports, and When Figures Don’t Lie

Fool me once: Shame on You. Fool me twice: Shame on Me. Old American proverb.

Figures don’t lie. But liars figure. Old American proverb sometimes attributed to Mark Twain.

“I would love to have surplus money, but at this point, the goal was just to close the gap,” said City Manager Jose Ramirez, noting the city originally faced a $150,000 shortfall. “You’re not trying to get any more than what’s needed from the (employee) bargaining units. With the budgetary concessions we had, we wanted to get to zero.” Livingston adopts a balanced budget, Ramona Giwargis, Merced Sun Star, March 23, 2014

If the concession agreements are not extended, the city’s general fund will dip into the red by $80,000. The agreements end on June 30, and that will attribute to an increase to city expenses – Ibid

At the March 18, 2014 City Council Meeting, the City Council adopted what was said to be a “Balanced Budget” after finally closing a “Budget Gap” of over $150,00.  One would think that meant the City had found a way to Cut Spending by that very amount. But that’s not really how that Balanced Budget came about.  There is a little piece of the Budget Puzzle that has been left out.

And from what I can see, from looking at the numbers, the City just might have a little difficulty convincing the Bargaining Units to extend concessions into the next Fiscal Year. More on that a little later. But first.

FAMILY HAMBURGER NIGHT AT THE VFW

Family-Hamburger-Night--03-20142

Kite-Festival-20144LET’S GO FLY A KITE!  The Knights of Columbus presents The Week of the Young Child and K97.5, 3rd Annual “Time to Fly” Kite Festival.  Sunday April 06, 2014 8:30 am – 3:30pm at the Livingston Middle School 101 F Street Livingston, CA 95334. FREE to the Public the first 500 kids get a free Kite.

We are less than 2 weeks away from our 3rd Annual Kite Festival and Kite building days at local schools starts next week.  We will be visiting all the local schools from the Head Starts to the Middle Schools to build kites with the kids and their parents. The Kites will have BLUE tails to represent the week of the young child.

The Merced County Sheriff will be present at Livingston’s 3rd Annual Kite Festival show casing its arsenal of crime-fighting tools including their 1973 UH-1H VIETNAM-ERA HUEY Helicopter, Sheriff’s S.W.A.T. Armored Vehicle, “Bearcat,” and The Sheriff’s Water Rescue Boat.  Come meet and thank some of the dedicated officers including the pilots and SWAT and Dive Operators.

There will be GIANT Kite Flying Demonstrations by Brian Champie, George Halpin, Mike North and many more.  There will be kite-making workshops, plus other activities for everyone to enjoy including Kite Building Contests, The Rotary Club of Winton-Nuevo Latino Pie Eating Contests, Face Painting, Bounce Houses, Crafts, Kite, and informational Vendor booths, plus various cultural performances. 

We will also have safety demonstrations from PG&E, Livingston Police and Fire, CHP, and Merced County Sheriff and of course “The Jim Strealy Memorial Candy Drop,” presented by Fluetsch and Busby Insurance.

Don’t forget to enter FREE Kite Building Contest for your chance to win cash money! We are still looking for Non-Food Vendors.  For more info, pictures of last year’s event, and vendor application, visit our website:  https://www.livingstonKiteFestival.com or call Contact: Julio Valadez  209-277-1402 LIKE and SHARE our FACEBOOK page for a chance to win a 70 Inch Stunt Kite!

TRUST, NEGOTIATIONS, AND BARGAINING IN GOOD FAITH…Some of you may have read the article in the Merced Sun Star about Livingston finally adopting a balanced budget nearly 9 months after the Fiscal Year started. According to the article

Despite reaching concession agreements with employees that included furloughs, pay reductions, limiting vacation cash-outs and requiring employee contributions toward health insurance, the budget shows the city will break even but not achieve a positive financial position

OK. So the City is just breaking even. This time. But there is a little part of the Budget Gap Story that has been left out. And in my opinion, the part that was left out may well have an impact on any future Negotiations between the City and Employee Bargaining Units.

Let’s begin by examining the text from the Staff Report.

Paragraph 1 states:

The City’s financial records show that the City has depleted its General Fund balance (reserves) over the last 10 years. A decade of continuous operating deficits has resulted in significant impacts to City’s operations. The City had over 100% of fund balance in 2002 to cover its annual operating costs of over $3.5 million. This fund balance (reserves) was reduced to approximately 60% of annual operating expenditures by 2007 as expenditures materially increased to over $5.6 million. Five years later, the fund balance for fiscal year 2012-13 as of June 30, 2013, is $843,000 which is below 20% of the City’s projected annual expenditures. This figure reflects the write-off of the Outstanding Notes Receivable (Loan) from the Former RDA in the amount of $511,000. The State Department of Finance declared this loan to be an un-enforceable obligation.

Paragraph 2 states:

A similar scenario is reflected on the City’s cash balance in the General Fund. These are the results of the continuous economic challenges Livingston along with many other agencies continues to face.

Paragraph 3 states:

Management conducted several budget workshops in mid 2013 in efforts to address the anticipated General Fund operating deficit of nearly $150,000 and to allow public/community input. This gap was then reduced to about $100,000 after management successfully negotiated a three year reimbursement agreement with Merced County in late September 2013. An analysis concluded that the County overcharged the City for Property Tax Administration between 2008 through fiscal year 2012. Per Statute of Limitations, the City could only recover three years of reimbursement plus accrued interest. County agreed to reimburse City in three fiscal year installments at just over $58,000 per year, FY2012-13, FY2013-14, and FY14-15.

Paragraph 4 States:

This anticipated gap was further reduced by negotiating budget concessions with the bargaining groups. Agreements were reached with Management & Confidential employees and Public Works units in early November 2013. General Fund savings from these two units in the form of personnel cost is estimated at $28,000 plus about $51,000 in other funds during fiscal year 2013-14. Late agreements were reached with our Police units after both units decided to exercise their right to Fact Finding procedures. On March 4, 2014, after a year of negotiations with these two units, an agreement was reached to honor the recommendations made by Mr. Burdick, mediator on Fact Finding process. Anticipated personnel savings to the General Fund from these two Police units during 2013-14 are estimated at $22,000 in the General Fund and about $5,200 in other funds.

Paragraph 5 states:

A mid-year review was performed by finance in January-February and minor adjustments were made to revenue and General Fund expenditure projections, this included reallocation of funds within and between departments to balance the General Fund budget.

Paragraph 6 States:

The City has posted a copy of the proposed budget on its website and will provide a free copy of the proposed budget on a CD to any citizen desiring to have one. Copies will also be available for public review at City Hall.

If you only look at the plain language of the Staff Report,  you would most likely arrive at the following conclusions:

  1. The General Fund has been in a downward slide towards Bankruptcy for quite some time and we’re just about there.

  2. The City is in a heap of trouble, financially. Just like everyone else.

  3. Expenses were expected to $153,000 more than Revenues. But the City managed to negotiate a refund of about $50,000 from the County: which dropped the “budget gap” to $100,000.

  4. The City also negotiated about $50,000 of concessions from the Employee Bargaining Units: which dropped the “budget gap” to $50.000.

  5. During the Mid Year Review, “minor adjustments” were made which eliminated that last $50,000, thereby dropping the “budget gap” to zero.

  6. And you can see it for yourself by looking at the version of the Budget on the City’s website.

So, from the March Staff Report, you would most likely gotten the impression that back in July 2013, the City was facing a Budget Gap of close to $150,000.

And after several months of negotiations, this Planned Spending was reduced by concessions gained from Employee Bargaining Groups, refunds from the County, and some Inter Departmental “adjusting”:thereby reducing the nearly $150,000 Budget Gap to Zero {0} Resulting in a Balanced Budget.

But as I mentioned earlier, this Staff Reports leaves something out: the fact that Projected Revenues were adjusted UP about $150,000 during the same time all those Refunds, Concessions, and other “adjustments” were supposed to be bringing Spending DOWN.

But, but, but, the Budget was Balanced. Wasn’t it? Well, yes, in a manner of speaking. Just not exactly the way the Staff Report makes it appear.

At the General Fund Budget Workshop in July 2013, According to the Spreadsheets included in the Agenda Packet posted online, the Budget Gap was calculated as follows:

· General Fund Revenues: $4,402,825

· General Fund Expenses : $4,546,718

· “Budget Gap”:                         ($143,893)

And there was a whole lot of negotiations with the bargaining units about things like furlough days and other concessions because it was a Critical need to close that Budget Gap.

So..when I saw the Agenda Item about the Budget on the March 18, 2014 City Council Agenda, I expected that after the Employee concessions, and other spending cuts the Staff Report talked about, the numbers would look something like this:

· General Fund Revenue: $4,402,825

· General Fund Expenses: $4,402,825

· Budget Gap: 0

But that’s not what the Revised Budget Said. What it said was:

· General Fund Revenue: $4,556,650

· General Fund Expenses: $4,556,650

· Budget Gap: 0

Total Revenues were increases by over $153 thousand dollars but Total Spending wasn’t cut at all! In fact, Total Spending INCREASED almost $10,000.

And from looking at the details, any “budget savings” from employee concessions were more than wiped out by increased spending on Professional Services, Contract Services, and other spending increases.

When I pointed out those facts to the City Council and asked “what happened”, I got quite the long answer about how Budgets are Living Documents and how The-Longer-You-Go-The-More-Things-Change from the City Manager and a retort about Just-Looking-For-Things-To-Criticize from the Mayor.

Excuse me?

I understand that there are times when spending cuts just have to be made. I get that.

I understand that there are times when Pay Cuts and Furloughs may be truly necessary. I get that too.

But if you tell the Bargaining Units at the beginning of the Fiscal Year that Concessions are necessary because there just isn’t going to be enough Revenue coming in…

And negotiate, negotiate, negotiate, because you so NEED those concessions in order to close that Budget Gap.

Then turn around around towards the end of the year, after the concessions were made, with a “oops, we bad, we’re actually going to get $153,000 more Revenue then we originally figured on, but we plan to spend it elsewhere…but we sure do appreciate those concessions anyway.

Why should you think you will be trusted the next time you cry “Budget Gap! We have a Budget Gap to Close!”

Just sayin

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